Want to Learn about Annuities?

Good, you came to the right site. In the coming weeks, you are going to learn enough about annuities to help you decide if annuities fit in your financial plan or if you should avoid them like the plague. To begin, let’s talk about four annuities and some of their basic characteristics:

Immediate Annuity: The Personal Pension

The immediate annuity is essentially a personal pension and in my opinion and is probably the annuity most people think of when they think of an annuity. Immediate annuities pay a specified amount of money for either a specific time or a lifetime. When you buy an immediate annuity, you choose your income option up front and it cannot be changed. Income choices include:

Life

Period Certain and

Life with period certain

If the life option is selected, the insurance company guarantees your income as long as you live. In exchange for the income guarantee, the insurance company also controls the corpus of your deposit-if you pass away, the insurance company keeps the remaining payments. Alternatively, if you choose the life with period certain option you receive income for the rest of your life but if something happens to you before a certain time period, your beneficiary will continue to receive payments for a specific amount of time.

10 Year Period Certain Example:

Mrs. Trump chooses an immediate annuity and selects the life with a 10 year period certain payout. If Mrs. Trump passes away in year three of the contract, her beneficiaries will receive payments for the 7 remaining years.

The payment you receive from your immediate annuity is based on several factors including the deposit amount, pre calculated interest rates, and how long the insurance company expects the client to live (mortality tables). Currently, life expectancy is near all time highs and interest rates are near all time lows making alternatives to immediate annuities more attractive for most retirees.

Traditional Fixed Annuity: Arch-rival to a CD at the Bank

Fixed annuities can look, feel, and are often compared to a certificate of deposit (CD) at the bank but in many cases pay a higher interest rate. Don’t be confused, annuity guarantees rely on the financial strength and claims-paying ability of the issuing insurance company and are not guaranteed by any bank or the FDIC. Moving forward:

Traditional fixed annuities provide an interest rate that can be changed by the insurance carrier once per year but offer a guaranteed minimum interest rate for a specified time period. It’s common to receive an upfront or 1st year bonus to increase the long term return on the contract. Beware, many insurance agents will only share the ‘up front’ rate and will mislead your probably rate of return. Traditional fixed annuities usually carry a higher guaranteed ‘real’ rate of interest than fixed indexed and immediate annuities. For free fixed annuity rates click here.

Multi year guaranteed annuities or MYGA’s are also under the traditional fixed annuity basket. MYGA’s pay a specific interest rate for a specific amount of time. The interest rate will not change during the life of the MYGA contract regardless of interest rate changes.

It’s almost impossible to predict the direction of interest rates 100% of the time, for this reason consider a laddering strategy to stagger the timing of your annuities coming due for renewal. For free multi year guarantee annuity rates click here.

Variable Annuity:Sub Accounts (Mutual Funds) in an Insurance Wrapper

Variable annuities look, feel, and try to perform (excluding fees) similar to mutual funds but they have a few extra insurance features that entice retirees to buy them. The biggest attraction is usually their death and income benefits.

In theory, variable annuity accumulation values perform better than fixed and fixed indexed annuity accumulation values during positive investment years, but they lose value when the underlying sub-accounts perform poorly.

Although variable annuities are supposed to perform the best during big years in the stock market, the cost of the annuity often bogs down their returns.

Potential fees include:

Mortality and expense

Admin

Sub-account

Death benefit and

Income benefit

Fees for Variable Annuities can be as low as 1% and we’ve seen them as high as 5.5% per year! In my latest client review, we discovered the following fees:

M&E 1.65%

Income Benefit 1.25%

Sub Account Average 1.00%

Total fees: 3.9% per year

According to Swan Wealth Advisors performance sheets, the S&P500 averaged 6.62% per year since July of 1997. If the variable annuity sub accounts equaled the S&P 500 performance during that time period and you subtracted the 3.9% fee each year, investors would be left with little to no return at all.

Fixed Indexed Annuity: ­The Hybrid Annuity

The fixed indexed annuity is an annuity that delivers interest on your money based on a specified calculation of an equity, bond, or commodity based index like the S&P 500, Dow, or Gold. Unlike variable annuities, stocks, and bonds, Indexed annuities DO NOT have have negative returns (unless your rider fee exceeds the interest credited). Clients earn either positive or 0% interest. In exchange for this protection the insurance company uses spreads, caps and other features that limit your topside growth potential.

Potential Fees Include:

Death Benefit

Lifetime Income Benefit

Caps (synthetic fee)

Spreads (synthetic fee)

Declared rate (synthetic fee)

In theory, fixed indexed annuities offer the safety of a fixed annuity with the potential for performance that rivals variable annuities. Annuities are not an investment. They should be viewed as a savings vehicle and should be compared to:

Other savings vehicles like CD’s and money markets or

Income supplements to social security/pension.

An annuity is designed for safety first and performance second and should be used as a compliment to the rest of your retirement portfolio. Annuities should be purchased for the things they CAN do, not the things they MIGHT do.

The information in this blog post is not intended as tax, financial, insurance or legal advice. Please consult a licensed professional for specific information regarding each individual situation. This post was developed and produced on a topic that may be of interest to the general public. The opinions expressed, and the material provided are for general information only and should not in any way be considered solicitation.

Markets and The Fed

Unfortunately, for the last 7 years, financial markets have moved based on the expectations and decisions of the federal reserve instead of from fundamentals, technicals or any other historical metric. Tomorrow’s Fed announcement will likely continue this unprecedented and unwelcome pattern.

Should the Fed raise rates, we would expect that equity markets, in the short term, would tumble. Why do we expect the market to drop if the Fed chooses to raise rates? We believe a substantial increase in rates for an extended period of time would create this type of volatility because:

Increased interest rates on new mortgages absent of inflation would suggest a decrease in home values due to rising borrowing costs.

Corporate P&L’s would likely drop because higher rates would increase their cost of debt.

Poor auto sales may result from the inability to finance at 0%.

Investors could aggressively withdraw from bond funds out of fear that their principal will erode.

A trickle down effect from the above and many more industries will be negatively impacted from this change.

If they decide rates should remain unchanged, we would expect the recent historical equity market highs to be re-tested.

Sensitivity to Rates Rising

The equity markets have shown on numerous occasions how sensitive they are to Fed speak. In the last year, we’ve witnessed how 2 small suggestions and an actual rate hike from the Fed sent equity markets quickly below their 50-day moving average.

VIX

The CBOE volatility index (VIX-also known as the fear gauge) is also hypersensitive to changes from the Fed. In the last few weeks, the VIX was resting near 52 week lows, suggesting complacency in the market. Complacency ended abruptly when a Fed chairperson suggested a rate increase in September may be warranted. After this announcement went public, the VIX catapulted over 70% in just a few short days. As it stands now, the day before their announcement, the VIX is hovering around 16 (in 2008 the VIX reached 80).

Year End Tax Planning

The 4th quarter is less than two weeks away. Get ahead of the game by reaching out to your CPA/tax team. Reaching out now, when your tax team has down time, will allow you to:

Have a solid estimate of your year end tax bill before the year ends. This will provide you ample time to react and plan for your final bill.

Ask your CPA about a variety of tax strategies that they may not have time to discuss during their busy season.

Re-connect with one of the most important people in your financial life.

The information in this blog post is not intended as tax, financial, insurance or legal advice. Please consult a licensed professional for specific information regarding each individual situation. This post was developed and produced on a topic that may be of interest to the general public. The opinions expressed, and the material provided are for general information only and should not in any way be considered solicitation.

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Many experts believe annuities are a key aspect of retirement planning. Why? Annuities are consistent and predictable and although there are reasons not to buy an annuity, there are many good reasons to consider having an annuity in a financial portfolio.

Safety and a guaranteed rate of return: Investors seeking a safe, predictable, and reliable cash flow should strongly consider fixed annuities. In addition to those features, fixed annuities offer guaranteed minimum rates of return and contractually guaranteed income riders to help retirees achieve their cash flow objectives.

Tax deferred earnings are not taxed until withdrawn: Fixed annuities earnings are not taxed until the money is withdrawn. For example, let’s assume that John invests $100,000 in a fixed annuity that earns 3% per year. If John doesn’t withdraw anything from his annuity, he does not pay tax on the interest. Taxes will not be paid until John makes a withdrawal or if he passes away, in the case of death, John’s beneficiaries would pay tax on the accrued interest.

Liquidity and easy to access funds: Fixed annuities come in all shapes and sizes. Many annuities offer clients an opportunity to withdraw 10% from their annuity without a penalty, others offer a 20% free withdraw if you don’t take a withdraw in the first to years, and some even offer a full return of premium without penalties (some companies will charge a fee to provide retirees more liquidity).

Simple wealth transfer: Annuities provide security for your loved ones after your death. Annuities pass onto a surviving spouse, children, and any other beneficiary without dealing with probate. In most cases this reduces legal and other costs/delays typically associated with probate.

Force Discipline: Many retirees get lost trying to chase stock market returns and end up blowing up their retirement savings. Allocating a portion of your retirement savings to annuities eliminates the risk of losing your retirement savings based on poor etf, stock, or mutual fund strategies. Since most annuities require you to sign up for 5, 7, or 10+ years, they limit the amount you can withdraw each year without a penalty. Limiting your withdrawals to 7 or 10% per year helps retirees avoid making quick financial decisions that could otherwise ruin their retirement plans.

An annuity can be a great addition to a retiree investment portfolio. As we mentioned above annuities provide investors: safety, liquidity, tax deferral, wealth transfer, and discipline. Annuities put the investor in charge of their retirement by offering protection from market volatility (ups and downs) and contractual guarantees.

The success of a financial portfolio depends on many factors; to understand the best direction for your investment plans, contact The Investment Professor .

The information in this blog post is not intended as tax, financial, insurance or legal advice. Please consult a licensed professional for specific information regarding each individual situation. This post was developed and produced on a topic that may be of interest to the general public. The opinions expressed, and the material provided are for general information only and should not in any way be considered solicitation.

Many companies across the United States protect their employees with a Group Life Insurance policy. These group policies are usually part of the benefits package and are corporate-sponsored. In many cases, the business contributes significantly to the cost of these insurance policies. Group life insurance plans typically cover everyone in the group (employees) on a guaranteed basis. When working for a corporation, group life can be a very affordable and viable option for the employees.

Earlier this month, Bank of America announced that during the last quarter, they eliminated 2600 positions. As each former employee leaves the property for the last time, with a box filled with personal supplies, mementos, and pictures; one thing that is probably not in that box will be group life policy. What are the options as people leave corporate and start a new beginning?

Consider group life insurance plans as supplements to individual plans.

An employee typically has 31 days or less to convert to an individual plan.

Employees should research life insurance plans with an expert, that expert should offer more than one insurance company.

Work with a professional, experienced, independent advisor to assess the right path.

With professional advice, understand the basics of different types of life insurance offerings that are available.

Make the right life insurance decision based on facts and financial background.

Converting Group Life Coverage

Most corporations allow an individual to convert coverage to an individual plan, however conversion fees and premiums are typically higher than an individual policy purchased thourgh an independent insurance agent.

To understand the best direction to go financially, contact the Investment Professor to discuss your best after corporate insurance options.

Group plans do not allow individual customizations. They may not provide adequate coverage amounts needed for the individual. Many employees still purchase a separate policy to fortify the group policy.

It is important to remember that life insurance is an investment in the future. Each policy must be customized to fit the individual’s needs. Most individual policies are managed through an advisor who provides service, reviews, and guidance to the client. For most people, it is this relationship with the expert that makes the biggest difference.

Leaving a corporate position means leaving most benefits behind. To understand the best direction to go and make a more informed decision about the best insurance plan, contact the Investment Professor to discuss your insurance and investment options.

The information in this blog post is not intended as tax, financial, insurance or legal advice. Please consult a licensed professional for specific information regarding each individual situation. This post was developed and produced on a topic that may be of interest to the general public. The opinions expressed, and the material provided are for general information only and should not in any way be considered solicitation.

The financial world is a crazy place; full of change, chance and opportunity. How does anybody across the country capitalize on the future when there are so many economic variables? As evidenced by the recent Brexit, the United Kingdom is preparing its transition away from the European Union (EU). Economic conditions change, as do financial portfolios and investments. For the average investor across the U.S., it takes a clear understanding of financial planning, life insurance decisions, retirement considerations, investment strategies, financial reviews and more to build success. In 2016, financial investments need to adjust as the financial markets do.

Coast to coast, the Investment Professor offers the following eight advantages for prospective clients:

Free independent review analysis

Accurate and timely investment insights

Retirement income planning

Annuity education

401(k) rollover strategies

Financial planning solutions

Financial advisement

Life insurance information

Over the next few weeks and months, there will indeed be increased market volatility across the country, the Investment Professor can help clients with strategy and education; these are the key variables to financial success. It is important that clients receive the right information and build a success plan, unique to each individual. Each situation is different, unique and distinctive. What is good for one client might not be the best for another. There is always an array of questions that need answers. They could involve investments, financial planning and insurance. The need for the right answers has never been more important.

Investment Professor helps investors from coast to coast become better clients. People need to make informed decisions about their life savings and they want it handled by an investment strategist; one they know, like and trust. It is all about relationship. Know we are a call away.

Our goal is a simple one. We help clients grow. It is our guiding principle. We help investors with financial insight, estate planning, investment reviews, and portfolio assessments. And we provide this analysis free of charge! Our hope is that the information helps improve your financial education and helps you make more informed decisions. Maybe you’ll choose the Investment Professor, maybe not. At the very least, we want investors walking away asking more questions and seeking the right answers. Before making a choice about money and finances based on intuition, call Jason Soloman at 980 233 9770 and he will provide you a FREE and CONFIDENTIAL opinion of your portfolio.

The Investment Professor is more than financial advice. We are your partner in success.

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This blog post from the Investment Professor is meant to be informational in nature only. Before considering the purchase of any investment product, it is important to do due diligence and consult a properly licensed professional. Each investor is different and specific questions relate only to individual circumstances.

According to the yahoo article found here, Jamie Dimon and Lloyd Blankfein have delivered memos to their clients about the recent vote that will remove Britain from the European Union, also known as Brexit.

Read their Brexit quotes below.

Dimon’s memo:

British citizens voted yesterday to begin a new, independent relationship with the European Union. This decision is a seminal moment in European politics and in the history of the United Kingdom.

J.P. Morgan has 16,000 employees in the U.K. We are extremely proud of the work they do and our long history in the country. Regardless of today’s outcome, we will maintain a large presence in London, Bournemouth and Scotland, serving local clients as we have for more than 150 years.

The framework of the U.K.’s engagement with the EU, including trade agreements, will be negotiated over a period of years. For the moment, we will continue to serve our clients as usual, and our operating model in the U.K. remains the same.

In the months ahead, however, we may need to make changes to our European legal entity structure and the location of some roles. While these changes are not certain, we have to be prepared to comply with new laws as we serve our clients around the world. We will always do our best to take care of our people and do the right thing during times of change.

We recognize the potential for market volatility over the next few weeks and we are ready to help our clients work through it. As of today, there are no changes to the structure of our clients’ relationships with JPMorgan Chase or their ability to work with our firm, but again this may change in the coming months or years.

We are hopeful that policymakers will recognize the immense value created through a continued open economic engagement between the U.K. and EU members. As negotiations offer more clarity over the coming months, we will communicate with you and with our clients regarding any relevant changes.

Jamie Dimon, Daniel Pinto, Mary Erdoes

Blankfein’s memo:

As you may have seen by now, the British people have voted to leave the European Union, and we respect this outcome. We have had a strong team focused on this potential result for many months. There is no immediate change to the way we conduct our business. A process of negotiating the terms of the exit will now begin, and is expected to take a considerable period of time. Goldman Sachs has a long history of adapting to change, and we will work with the relevant authorities as the terms of the exit become clear. We are committed to our people and our clients, and will work diligently to ensure the best possible outcome. We will continue to communicate with you as relevant information becomes available.

Lloyd C. Blankfein

Gary D. Cohn

The markets are primed for action. Even before Brexit, the S&P 500 failed to breach previous record highs 3 times in 12 months which is often a signal for turbulence ahead. Here’s an annotated chart I sent to a client on June 20th, 2016. It doesn’t usually play out this way, but the timing of this was pretty amazing.

S&P 500 Triple Top

In addition to the Brexit news, the U.S. jobs report recently delivered a negative surprise, and previous month jobs number were revised down.

Things are bad, if they weren’t the world would not be at zero to negative interest rates.

Buckle up for the ride, I expect a lot more volatility through the end of the year.

By the way, volatility does not mean the market will go straight down.

My hope is that you take this information, research, do more research, build a plan, and plan for your plan to be wrong.

Take a few minutes and consider your unique situation. Next, write down your thoughts and concerns. Think about your thoughts and words again. Finally, share your findings with me by calling, emailing, or filling out the form below.

The information in this blog post is not intended as tax, financial, insurance or legal advice. Please consult a licensed professional for specific information regarding each individual situation. This post was developed and produced on a topic that may be of interest to the general public. The opinions expressed, and the material provided are for general information only and should not in any way be considered solicitation.

We’ve seen some volatility in the recent past, but this time I think it will continue through the end of the year. If you’re not ready for a bumpy ride, you may want to consider some hedging strategies or possibly selling some of your shares.

Option Values Not Correlating

Although financial markets are seeing solid movement, option values have not followed suit. Instead, volatility premium (measured by the VIX) remained subdued while violent market swings took over, leading to skewed option valuations.

Why would this happen? My guess is that markets appear to be anticipating:

The same global government intervention AND

The same market reaction to this intervention that we’ve seen since March of 2009.

Government intervention has been one of the main drivers of recent equity market success for the last 7 years. Historically, these global Central Bank free money policies drove violent market rallies- scaring off investor attempts at shorting markets- creating a one sided market full of liquidity holes (details of the liquidity topic would need to be addressed in a book).

Mohamed El-Erian recently spoke about this liquidity problem on CNBC saying, “…let’s not forget there’s very little countercyclical liquidity, which means, when we hit a small air pocket, it turns out to be large.” See the Article Here

Great, now we can expect more of the same inability to navigate?

Not so fast.

The market movement is exciting for active traders, but this pattern surfaced a few times before. A 10% drop rocked the market 3x in the past 5 years.

True to form, January’s movement also triggered monetary easing when the European Central Bank (ECB) unleashed more “unlimited” support and easing initiatives. Because one major nation isn’t enough, Bank of Japan (BoJ) ventured into the first ever NEGATIVE INTEREST RATE POLICY PROGRAM (first for a leading economy).

The US Federal Reserve also held a meeting this past week where they halted all activity on rate changes. That’s the first step in the changing dynamic of the markets and could be a sign that the market cycle is finally turning. IT IS THE FIRST TIME THE FED HAS HALTED POLICY and did not introduce new easing programs in response to markets.

Global Central Banks Policy Impact is Tapering

Although the recent market movements didn’t significantly alter option valuations, our recent analysis and new expectations show that global government intervention attempts are having notably less impact than in the recent past. For the first time since March of 2009 we are seeing diluted reactions to continued monetary policy easing. Instead of the violent reactions to loose monetary policy, the pattern broke and the last few weeks displayed markets that do not appear to be as excited about continued monetary easing.

This shift in human behavior/market reaction marks a change to the overall probability of a negative thesis playing out (negative, not the end of the world). Combine this new pattern with some additional catalysts and this could be the start of a change in market cycles.

Margin Debt vs. DJIA -a pattern to consider

The chart above shows how recent market corrections have strong correlations to extreme increases in private margin debt. This past year private margin debt set a record (see: irrational exuberance) and even exceeded values of the dow jones industrial average which has only occurred once in history: the peak of 2007.

What is margin debt?

It is people investing in financial markets with borrowed money. Right now we have a plethora of investors in the financial markets based on money that is not actually theirs.

How does this answer my earlier question…what should I do with my stock?

My hope is that you take this information, research, do more research, build a plan, and plan for your plan to be wrong.

Take a few minutes and consider your unique situation. Next, write down your thoughts and concerns. Think about your thoughts and words again. Finally, share your findings with me by calling, emailing, or filling out the form below.

The information in this blog post is not intended as tax, financial, insurance or legal advice. Please consult a licensed professional for specific information regarding each individual situation. This post was developed and produced on a topic that may be of interest to the general public. The opinions expressed, and the material provided are for general information only and should not in any way be considered solicitation.

Medicare Deductibles to increase in 2016

Goodbye 2015 and hello increased Medicare deductibles. For your convenience, we’ve provided a summary of the new deductibles for Medicare, including the Medicare Part B deductible which will most noticeably impact beneficiaries with: Medicare Supplement Plans G, A, B,D, K, L, M, N.

Medicare Increased each deductible in 2016 to the following amounts.

How increased Medicare deductibles impact retirees

If you have a Medicare Supplement policy, you should expect an increase in your premium. If your plan covers part B of Medicare, expect your increased premium to account for the part B increase (in addition to the others factors that will likely raise your premium each year). If your plan does not cover the part B deductible, your calendar year deductible is now $166 (13% increased from the $147 deductible in 2015).

What retirees should do

If you’re on Medicare and only require a few prescriptions, it is in your best interest to shop different supplemental insurance plans each year. If you have had the same plan for 3 years or more, there is a good chance you could save money on the same plan with a different company.

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Rule 48. Exemptive Relief — Extreme Market Volatility Condition

(a) In the event that extremely high market volatility is likely to have a Floor-wide impact on the ability of DMMs to arrange for the fair and orderly opening, reopening following a market-wide halt of trading at the Exchange, or closing of trading at the Exchange and that absent relief, the operation of the Exchange is likely to be impaired, a qualified Exchange officer may declare an extreme market volatility condition with respect to trading on or through the facilities of the Exchange.

(b) In the event that an extreme market volatility condition is declared with respect to trading on or through the facilities of the Exchange, a qualified Exchange officer shall be empowered to temporarily suspend at the opening of trading or reopening of trading following a market-wide trading halt: (i) the need for prior Floor Official or prior NYSE Floor operations approval to open or reopen a security at the Exchange (Rules 123D(1) and 79A.30); and/or (ii) applicable requirements to make pre-opening indications in a security (Rules 15 and 123D(1)).

(c) A suspension under section (b) of this Rule is subject to the following provisions:

(1) (A) Before declaring an extreme market volatility condition, the qualified Exchange officer shall consider the facts and circumstances that are likely to have Floor-wide impact for a particular trading session, including volatility in the previous day’s trading session, trading in foreign markets before the open, substantial activity in the futures market before the open, the volume of pre-opening indications of interest, evidence of pre-opening significant order imbalances across the market, government announcements, news and corporate events, and such other market conditions that could impact Floor-wide trading conditions.

(B) Such review shall be undertaken in consultation with relevant officers of NYSE Market and NYSE Regulation, as appropriate. Following the review, the qualified Exchange officer or his or her designee shall document the basis for declaring an extreme market volatility condition.

(2) The qualified Exchange officer will, as promptly as practicable in the circumstances, inform the Securities and Exchange Commission staff that an extreme market volatility condition has been declared, the basis for such declaration, and what relief has been granted.

(3) An extreme market volatility condition may only be declared before the scheduled opening or reopening following a market-wide halt of securities at the Exchange.

(4) A declaration of an extreme market volatility condition shall be in effect only for the particular opening or reopening for the trading session on the particular day that the extreme market volatility condition is determined to exist. The Exchange may declare a separate extreme market volatility condition on subsequent days subject to sections (b)(1) through (b)(3) above.

(5) A declaration of extreme market volatility shall not relieve DMMs from the obligation to make pre-opening indications in situations where the opening of a security is delayed for reasons unrelated to the extreme market volatility condition.

(d) For purposes of this Rule, a “qualified Exchange officer” means the Chief Executive Officer of ICE, or his or her designee, or the Chief Executive Officer of NYSE Regulation, Inc., or his or her designee.